Anatomy Of A 1040 – Part 1

Detail of "A Series of Anatomical Plates The Structure of the Different Parts of The Human Body" by Jones Quain, M.D., 1854, via Wikimedia Commons.“The hardest thing in the world to understand is the income tax.”

— Albert Einstein, physicist

So, let’s make it a little easier.

One of the (many) complaints I hear about taxes is that they are too complicated.  In fact, I’m told they are so unknowable that they are impossible to understand.  The danger with this sort of thinking is that the person who is ignorant of their taxes is at the mercy of their tax preparer.  If they don’t understand the for they’re filing, how will they know if their taxes are done properly?

Remember, when you sign the returns, you’re attesting that they’re true.

So, let’s make ourselves educated and knowledgeable consumers by understanding the basics of the 1040 form.  You can go to the IRS’s website and download a copy of the form to follow along.

Here’s a brief overview of how your taxes are calculated:

Gross Income
– Adjustments to Income
Adjusted Gross Income
– Deductions
– Exemptions
Taxable Income
– Nonrefundable Credits
+ Other Taxes
– Payments and Credits
Refund / Taxes Owed

The 1040 has five sections on the first page (which is the page we’re looking at today.)  We’ll start at the top.


Detail of the label of the Form 1040 for 2011The first part of the 1040 is the label.  It’s the part where you identify who’s filing the return (you,) and whether or not you want $3 to go toward the presidential election campaign fund.  It’s important to know that, if you chose to direct $3 to go to the fund, it won’t increase your taxes.  You’re just redirecting taxes you already pay.

This section shouldn’t be too difficult.  The next section is a little tougher.

Filing Status

Detail of the filing status of the Form 1040 for 2011

This is where it’s really easy to get bogged down.  It’s generally pretty obvious if you’re single and have never been married.  Generally, married persons file jointly.  But, all of these filing statuses have qualifications and details that have to be met (especially Head of Household.)  The good side of this is that there are only five choices, so options are limited.  Next comes the…


Detail of the exemptions of the Form 1040 for 2011

Here’s where you claim exemptions for yourself, spouse, and dependents.  Claiming yourself is something of a no-brainer (there are exceptions,) but there are some pretty non-intuitive rules to determining dependency.  Make sure your tax preparer can explain why someone would qualify or not qualify as a dependent.


Detail of the income section of the Form 1040 for 2011This is the long, complicated section where you sum up you income.  There are all sorts of different rules for different types of income, and very nearly every box has a corresponding form.  Simply put, though, you’re just adding up your income to get what we call Gross Income.

Adjusted Gross Income

Detail of the adjustments section of the Form 1040 for 2011Now things start to get a little complicated.  Adjustments to income are things that you can use to reduce the amount of income you use to calculate your income tax.  In this case, you get to add up various expenses, and then subtract them from your Gross Income.  So, Gross Income – Adjustments = Adjusted Gross Income.  Now, we’re done with the first page.

So far, we’ve filled out:

  1. The label – enter our identifying information
  2. Filing Status – determine what type of taxpayer we are
  3. Exemptions – determine how many dependents we have and how many exemptions we can take
  4. Income – determine how much money came in this year, and find our Gross Income
  5. Adjusted Gross Income – determine what expenses/adjustments we can subtract from our Gross Income in order to calculate our Adjusted Gross Income.

So, does this look so bad?  I mean, there’s a lot of detail in there, but you can see the underlying structure now, and should be able to follow along when you tax preparer reviews your taxes with you.

We’ll tour the back page in the next post.

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